A normative account of self-deception, overconfidence, and paranoia

Self-deception, paranoia, and overconfidence involve misbeliefs about self, others, and world. They are often considered mistaken. Here we explore whether they might be adaptive, and further, whether they might be explicable in normative Bayesian terms. We administered a difficult perceptual judgment task with and without social influence (suggestions from a cooperating or competing partner). Crucially, the social influence was uninformative. We found that participants heeded the suggestions most under the most uncertain conditions and that they did so with high confidence, particularly if they were more paranoid. Model fitting to participant behavior revealed that their prior beliefs changed depending on whether the partner was a collaborator or competitor, however, those beliefs did not differ as a function of paranoia. Instead, paranoia, self-deception, and overconfidence were associated with participants’ perceived instability of their own performance. These data are consistent with the idea that self-deception, paranoia, and overconfidence flourish under uncertainty, and have their roots in low self-esteem, rather than excessive social concern. The normative model suggests that spurious beliefs can have value – self-deception is irrational yet can facilitate optimal behavior. This occurs even at the expense of monetary rewards, perhaps explaining why self-deception and paranoia contribute to costly decisions which can spark financial crashes and costly wars.